Budgeting

Podcast: Budget for What Matters to You

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[Host] Welcome to Money Talk, the podcast series that helps you manage your money—and improve your financial well-being! This week, we’re talking with Paula Pant, blogger, traveler and entrepreneur at AffordAnything.com. Paula knew she didn’t want to be tied to an office job forever. So she put together a budget, saved enough money to quit her job and traveled the world for two years. Then, she found a way to earn money on her own terms. In this episode, Paula tells us how to budget for the life you want.

Here’s the podcast. Enjoy!

[brief music transition]

[Host] So a budget is a budget, right Paula? Do you really have the opportunity to customize it around your spending and savings goals?

[Paula Pant] Oh absolutely. A lot of people feel like they don’t have the money to pursue whatever their passion is, but that’s actually not true. A budget in fact is a plan that allows you to customize the way you spend your money. So be honest with yourself about what matters to you and then create a budget that allows you to spend accordingly.

[Host] Sure. And this is something you blog about and have personal experience doing, so how did you narrow down your priorities?

[Pant] A lot of it came down to challenging conventional thinking. Because society kind of has these guidelines about how you quote unquote “should” be spending your money. Society says that once you get to a certain age, you shouldn’t be living with roommates anymore, or you shouldn’t be driving an old beater car or that you need to dress for success and carry a name-brand handbag. So if you buy into social conventions, you’re going to be throwing a lot of money after keeping up with the Joneses. In order to live by your priorities, live by your values, you’ve got to overthrow that conventional thinking. Ruthlessly cut out the fluff—the stuff that is maybe socially acceptable, but that is maybe not important to you—and spend lavishly on the things you really care about.

[Host] So for you, travel was the big goal. What kinds of lifestyle changes helped you save the money you needed to make that happen?

[Pant] I made a lot. So when I graduated from college, I started at zero. I didn’t have any debt, I was fortunate to not have any student loans, but I was also starting from zero—I didn’t have any money to my name. So starting at that point, my friends and I, we all got our first jobs, and my friends started upgrading. Rather than living like a college student, they started renting nicer apartments, driving nicer cars, wearing nicer clothes, but for me, I was very clear that travel was a huge priority. But I just lived—continued living—like a college student but now instead of earning like a college student I was earning real money, I had a professional job in my career, and I saved that difference and could put that difference toward world travel, which was my big priority.

[Host] What strategies did you use to stay on track with your savings goals?

[Pant] I had two strategies: The first was to always think about opportunity cost. The way that I like to express this is that you can afford anything, but you can’t afford everything. Every dollar that you spend on X, is a dollar you can no longer spend on Y. So it’s easy to think, you know, ‘Oh I’d like to highlight my hair.’ And so you go to a really nice salon and get highlights put in and this would only cost $150 and I can afford that. Sure, yeah that’s great, and that’s fine; there’s nothing wrong with doing that. But then, stop and ask yourself: Okay, the $150 that I spent highlighting my hair is $150 that I can no longer put towards a flight to Europe. Am I willing to make that trade-off?

Strategy number two is to always have visual reminders of the thing that you’re really aiming for. So for me because I wanted to travel, I hung up a huge map of the world in my room and I looked at it every day. For me it was a reminder of why I was making sacrifices.”

[Host] Did you watch your account to stay motivated?

[Pant] Oh absolutely. I constantly check the balance of my bank account. You know how sometimes people get a little thrill of excitement from, say, shopping? I basically trained myself mentally to get that same thrill of immediate gratification by watching my savings account increase.

[Host] Yeah that makes total sense. And then you take that feeling of deprivation that makes long-term saving so hard out of the equation. Did you have a separate savings account for travel so you could see exactly how you were progressing?

[Pant] At the time that I was saving up to go travel the world, at that time banks didn’t offer what are called goal-based savings accounts. I love these. These didn’t exist when I was saving up to travel but they exist now and I absolutely adore them; I use them all the time. So basically how they work is you open up a savings account and then you can open little sub-accounts underneath and you can sort of earmark each one. So this one is for paying cash for my next car, this one is for flying to Paris, this one is for saving up for a down payment on a house. And there are two ways you can fund these. You can either put $20 a month, or $50 a month, or $100 a month toward whatever goal you have, so you can pay into it like it’s a bill. Or you can take what’s called a snowball approach where you imagine every dollar is a snowflake and you pile all these together and you hurl them all at one goal, you like chuck the whole snowball at one particular goal until you fully fund it, you fully max it out and then you’ve got that win, that thrill of victory. So rather than making small gains across an entire spectrum of goals, you throw an entire snowball at one goal, achieve it, max it out, get it done and then you move on to the next one.”

[Host] Nice! I like that whether you’re saving for one goal or several, you can see the specific balance that way and watch it grow. These are great tips—thanks for talking with us, Paula!

[Pant] Great, thank you.

[Host] That’s our podcast with Paula Pant! Thanks for listening. Check out more Money Talk podcasts for personal finance tips you can use to get organized, make a plan and stay on track to achieving your goals!

You work hard for your money and it should be working hard for you. Listen to this podcast for tips on building a budget for the life you want.

When it comes to making a budget, you’re more likely to succeed (and enjoy it) if you start with what matters to you and build a spending plan to match. Blogger, traveler, entrepreneur and budget-whiz Paula Pant shares her tips for budgeting for your priorities.

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